CONSOLIDATED FINANCIAL 

STATEMENTS 

of the 

United States Government 

Fiscal Year 1988 

PROTOTYPE 

Compiled and Published by 

FINANCIAL MANAGEMENT SERVICE 
.. 

FINANCIAL MANAGEMENT SERVICE 

DEPARTMENT OF THE TREASURY 

MISSION 

Promote the financial integrity of the 

United States Government through 

sound money management on behalf 

of the public. 

BICENTENNIAL MESSAGE FROM 

THE SECRET ARY OF THE TREASURY 

The Bicentennial of the founding of the Department of 

the Treasury celebrates a rich history and a proud tradition of 

public service. The Financial Management Service (FMS) 

has played an important part in establishing that record. 

The tasks that the men and women of the FMS accomplish are more complex than they were 200 years ago, but 

sound management is just as important today as it was when 

the Department of the Treasury was established on September 2, 1789. 

Nicholas F. Brady 
Contents 

Secretary's Statement 3 

Comptroller General's Statement 4 

Introduction 5 

Financial Highlights 7 

Consolidated Financial Statements 

Financial Position 11 

Operations 12 

Cash Flow 13 

Receipts and Outlays 14 

Reconciliation of Accrual Operating Results 

to the Cash Basis Budget 15 

Independent Auditors' Report 16 

Notes to Financial Statements 17 

Supplemental Tables 

Summary of Accounts and Loans Receivable 

Due From the Public 25 

Federal Debt 27 

Commitments and Contingencies 29 

Additions to Non-Federal Economic Resources 31 

Effect of Individual and Corporate Tax Benefits 

on Federal Revenues 33 

Open-ended Programs and Fixed Costs 34 

Federal Obligations 35 

For sale by the Superintendent of Documents, U.S . Government Printing Office 

Washington, D.C. 20402 

..

.. 

Statement of the Secretary of the Treasury 

The Department of Treasury is pleased to present this set of Consolidated Financial 

Statements prepared by th e Financial Management Service. These statements provide 

summary information about the financial cond ition and operations of the Federal 

Government. 

Substantial progress was made during FY 1988 in improving governmentwide finan -

cial management. The Financial Management Service together with the Office of Management and Budget and the General Accounting Office continued to work wit h agencies to 

standardize financial systems and improve the electronic transmission of data. Single primary accounting systems based on standard requirements are now being used in 16 

agencies. The re sult has been higher quality, more accurate financial data and more systems in compliance with Federal accounting standards . In fact, seven agencies are now 

able to issue complete departmental financial statements. Among them are the Department of Labor, Department of Veterans Affairs, General Services Administration , and Government Printing Office. Treasury will assess th e need for changes in its Consolidated Financial Statements and intends to drop the prototype label by the end of FY 1989 if 

agency systems are in substantial compliance. 

While significant strides have been made, th ere is still a lot more to do. We must instill 

a comprehensive approach to management of the Government's assets and liabilities and 

place a renewed emphasis on financial accountability. Our goal is to provide the public 

with a financial management program noted for both quality service and fiscal 

responsibility. 

Nicholas F. Brady 

Our goal is to provide the public with a financial 

management program noted for both quality service 

and fiscal responsibility. 

3 
4 

Statement of the Comptroller General 

of the United States 

The federal government's financial operations are the world's largest. Its annual outlays amount to almost a quarter of the country's gross national product, and its revenues 

are in excess of one trillion dollars. The federal government employs more than five million people, and it operates hundreds of programs. Several of these programs alone are 

bigger than most of the largest U.S. corporations and state governments. 

Consolidated federal financial statements convey summary information about the financial condition and operations of the federal government as a whole. They provide key 

information to American taxpayers on how their money is spent and give the Administration and the Congress information that is useful in determining the financial implications 

and consequences of fiscal and economic policy decisions. The consolidated financial 

statements are intended to disclose the magnitude of the government's assets, liabilities 

and the full cost of operations and programs for the year. 

Our long-term objective is to audit these consolidated financial statements and to 

render an opinion on their fair presentation. To achieve this, however, we must first audit 

the underlying agency financial statements . An ongoing program of conducting annual independent financial audits is a critical link to improving financial management in the federal government. Financial statement audits are currently being performed on most government corporations . In addition, we, the Inspector General community, and independent 

public accounting firms have recently audited the financial statements of several major executive departments and agencies. Others are currently being audited. Our goal is to 

eventual ly have all major departments' and agencies' financial statements audited. 

We are also continuing our efforts in monitoring the governmentwide effort to improve 

internal controls, the quality of which directly affects the reliability of the information in this 

report; and in assisting the Department of the Treasury in preparing this report by providing advice and sharing the information we've acquired through our audit efforts thus far. 

Sound financial management of the federal government is critical if it is to continue to 

provide needed public services and enhance its citizens' future standard of living. Sound 

financial management depends on modern financial systems containing reliable information. Though progress has been made toward improving the quality of information, substantial additional improvements are still needed before financial statements can be produced that can withstand the scrutiny of an audit and before the prototype label can be 

eliminated from the consolidated financial statements. Our audits of financial statements 

continue to disclose that many agencies are still reporting inaccurate and unreliable information in their financial statements submitted to Treasury, primarily due to poor financial 

systems and weak internal controls. 

Poor financial systems and weak internal controls not only affect the reliability of data 

provided to Treasury, but they also affect the reliability of data provided to (1) Congress 

and 0MB for budget-reduction and other decision-making purposes, (2) agency and program managers who need reliable data to effectiveiy and efficiently manage their operations, and (3) other external users who rely on the information reported. Improved financial 

systems and strong internal controls will reduce billions of dollars of wasteful spending. 

However, before agencies can produce more reliable financial information, comprehensive financial management reforms will need to be implemented. Comprehensive 

reforms toward restructuring and rebuilding financial management systems are essential 

for our government to effectively serve the needs of the Congress, the executive branch, 

and the citizens. Modernizing federal financial management systems must embrace a 

number of interrelated reform actions such as improving financial accounting and reporting, enhancing internal controls, and increasing the audits of agency financial statements. 

As with earlier reports of this type, we have not audited the accompanying financial 

statements and accordingly, we do not express an opinion on them. 

Charles A. Bowsher 
Introduction 

This year's report supports 

continued efforts in the Federal 

sector to establish accountability of its resources. Major 

components of it, for the first 

time, are built extensively on 

agencies' cooperation to enhance credibility levels. The report continues to serve as a historical reference for measuring 

accomplishments in providing 

objective financial information. 

Highlights in 1988 include: 

• The Statement of Operations 

was compiled directly from the 

reporting of Federal agencies. 

This represents a milestone because accrual basis data from 

agency reports was used for the 

first time. 

• Gold was valued at market to 

assure consistency with efforts 

to recognize fundamental 

changes in the value of certain 

financial assets. More changes 

in asset valuation will follow as 

issues under study are debated 

and resolved. 

• A Federal Obligations table 

was added to the Supplemental 

Tables section; supplementing 

cash receipts and outlay information, it highlights object class 

reporting which shows the firm 

commitment of the U.S. Government to acquire goods and services and complements the other 

tables in this section. 

A review of the consolidation process was performed this 

year by an independent CPA 

firm, Price Waterhouse (see 

page 16). 

Finally, results in the FY 

1988 report attest to the movement by Federal agencies to actively improve their financial accounting and reporting systems. 

However, the job is not yet complete. Further improvement is 

essential to meet the objective 

of total Governmentwide financial systems integration. 

5 

... a historical reference 

for measuring 

accomplishments 
..

., 
>, 

., 

• 

FINANCIAL HIGHLIGHTS 

Revenues and expenses 

The following graphs show revenues and expenses for fiscal years 1978 through 1988, and the major 

categories of revenues by source and expenses by function for FY 1988. These amounts, taken from the Statement of Operations, have been reported on an accrual basis and differ from those reported on the cash basis . 

The data supporting the graph of expenses by function have been estimated based on Treasury totals of budget 

outlays by function. 

TOTAL REVENUES AND TOTAL EXPENSES 

FISCAL YEARS 1978-88 

1300 

$ Revenues 

B 1100 Expenses 

I 

L 900 L 

I 

0 700 

N 

s 500 

1978 1980 1982 1984 1986 1988 

MAJOR SOURCES OF REVENUES MAJOR EXPENSES BY FUNCTION 

Individual lncomeTaxes 

Corporate Income Taxes 

Social I nsu ranee Taxes 

and Contributions 

Business-Type Operations 

42% 

0 5 10 15 20 25 30 35 40 45 

Percent 

Interest 

National Defense 

Social Security 

and Medicare w,_,_c._=_+_=_=. _= -= -~ -=-;z:-=- :::;-=_=_+_=_=~?P 

0 5 1 0 1 5 20 25 30 35 

Percent 

7 

34% 
... 

8 

Major categories of assets 

Assets are resources owned by the Federal Government that are available to pay liabilities or provide 

public services in the future. The following chart is derived from the Statement of Financial Position and depicts 

the major categories of assets for FY 1988 as a percent of total assets. The components for each of these major 

categories are contained in Notes to Financial Statements. 

MAJOR CATEGORIES OF ASSETS 

$1,184.4 billion 

Cash and Other Monetary Assets 

Receivables 

Inventories 

Property and Equipment 

Investments and Other Assets 

0 10 

Assets, liabilities, and accumulated position 

20 

Percent 

30 40 

The following graph depicts the assets, liabilities, and accumulated position reported in the Statement of 

Financial Position for fiscal years 1984 through 1988. Fiscal years 1984 through 1986 are not restated to reflect 

prior-period adjustments that occurred after fiscal 1987. 

4000 

$ 3000 

B 2000 

I 

L 

L 

I 

0 

N 

s 

1000 

0 

-1000 

-2000 

-3000 

TOTAL ASSETS, TOTAL LIABILITIES, AND 

ACCUMULATED POSITION, FY 1984-88 

1984 1985 1986 1987 1988 

D Assets Ill Liabilities D Accumulated Position 

'
Sources and uses of funds 

The charts below have been derived from the Statement of Cash Flow for FY 1988 and show the 

resources provided during the period and the uses to which they were put. 

SOURCES OF FUNDS 

Borrowing from the Public 

Decrease in Receivables 

Increase in Liabilities 

0 20 

21% 

40 

Percent 

USES OF FUNDS 

Cash Used in Operations 

Increase in Inventories 

Purchase of Property 

and Equipment 

0 10 20 

Percent 

60 80 

32% 

30 40 

9 

.. 

• 

CONSOLIDATED FINANCIAL STATEMENTS 

United States Government Consolidated Statement 

of Financial Position as of September 30, 1988 and 1987 

($ billions) 

Assets 

Cash ... 

Other monetary assets . . . .. . . . ... . . . . . . . .. . ... .. . . 

Accounts receivable, net of allowances . . . .. . .. ... . . . . . . .. .. . .... . . .. . . ... . . .. . 

Advances and prepayments ........... . .. .. .... .. . . . ... . . . ... .. . .. ... . ..... . 

Inventories, net. ..... . ........ . .. . . . ..... . ...... . . .. .. ... . .... . . . . • ...•. 

Investments, at face value ...... .. . . . ...... . ...... ... . . . ..... . . . . ... . . .. . .. . 

Loans receivable, net of allowances . . ... .. ..... . .. . .... . ...... . .......... . .. . 

Property, plant and equipment, net of accumulated depreciation ... .. . .. ........ . .. . 

Other assets ... .. . ... . . . . .. .. ..... . .. . ..... . ....... . .. .... . ......... . ... . 

Total assets . . . ........................................................ . 

Liabilities 

Accounts payable . . . . . ... .. .. ... . . . . . . ..... ..... . ........ ... ........... . •. 

Interest payable ........•..... • ...•...... .. . . . .. ... .. . . . .. ... . . . .... .... .. 

Accrued payroll and benefits . .. . . . . . . . ...... .. ... .. .. . .. .. . .. . . . . .. . .. . .... . 

Unearned revenu e .. .. .. . ..... . . . . . . . . .. . . .. . .. . .. . . . . . . . . .... . . . . ...... . . 

Debt issued under borrowing authority . . . . . ..... .. .. . . . .. . . . .... . . . .. . .. .... . . 

Pensions and actuarial liabilities .. . . . . ....... . . . . .. . . 

Other liabilities ... .. ... . . . . . . . ..... . . . .. ........ . 

Total liabilities ................... . ..... .. . . ..... · ..... . ...... . .......... . 

Accumulated position . .. . . ... . . .................. . ... . .................. . 

The accompanying notes are an integral part of this statement. 

1988 

44.4 

133.4 

70.6 

16.9 

212.5 

2.6 

179.8 

437.1 

87.1 

1,184.4 

100.9 

34.6 

11.9 

22.1 

2,047.8 

1,257.0 

162.7 

3,637.0 

-2,452.6 

11 

1987 

36.4 

150.4 

67.6 

7.0 

182.1 

3.3 

194.8 

453.9 

70.1 

1,165.6 

94.9 

31 .9 

11 .5 

7.9 

1,906.3 

1,265.0 

137.5 

3,455.0 
12 

United States Government Consolidated Statement 

of Operations for the Years Ended September 30, 1988 and 1987 

($ billions) 

Revenues 

Levied under the Government's sovereign power 

Individual income taxes .... .. .. ........... . . .. .. ....... ... . . . . . .. .. ... . 

Corporate income taxes . . . . . . . . . . . . . . . .... . ....... . .. . ..... . ..... . . .. . 

Social insurance taxes and contributions ....... ... ........ • .............. . . 

Excise taxes . .. ..... ... . ........ ..... . ..•...... •.... • ......... . • ..... 

Estate and gift taxes . . .. ......... . . ..... .... ... .. ....... . . .. . . .. .. . ... . 

Customs duties . . .. . . .. ........................ . ................ ... . . 

Miscellaneous .... ..... ....... .. ... .. ..... .. ... ..... . .. . . .... . . . .. . . . 

Earned through Government business-type operations 

Sale of goods and services . . . . . . . . . . . . . . . . . . ... . . .. ...... . ..... . 

Interest . . . . .. . . . ...... . . .......•. .. .. .. ..... .. .. . . . .... .. . .. . 

Other .. ... ....... . .... . . ...... .. .. ......... . ..... . . .. . .... . . ...... . 

Total revenues . .. . ...... ... .... . ......... .. .. ..... ........... . ....... . 

Expenses by agency 

Legislative branch ..... . .... . 

Judicial branch . ............ . 

Executive branch 

Office of the President . ..... . .... . ...... ... .. . . .... ... .... .. . .. .... .. . . 

Departments 

Agriculture . .. . 

Commerce . .. .. . . .. . ... ... . . .. .... . 

Defense . . . . ... . . .. ........ . . 

Education ............. . .... .. .. . .. ..... . . .. ........ . . ..... ... . . .. . 

Energy ... . . ... . . .... .. .... ....... .. .. ..... ...... . ........ . . . 

Health and Human Services ........ ..... .. . .. . . .. . ..... . . . . ... . ..... . 

Housing and Urban Development ........... . . ... . . ... .. .. ... . . ... . .. . . 

Interior ........... . ... . .... ... . . . .. . .... .... . . .. . . . . .. . .. .. . .. . .. . 

Justice ... . .. .. . . . .. ... . . ... . . . . .. . . . . .. .. .... . . . ... . .. .... . . . . .. . 

Labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................. . 

State .... . . .. .. .. . . .. . ..... .. .... . ... . . .. ...... .. ... . .. .... . ..... . 

Transportation .. . . . . ... . .. .. . .. . . . .... .. .... ... ... .....•.......... . 

Treasury .... . ...... ... . .. . . ..... . .............•.. • ..•........•.. 

Interest on the public debt ............. . .. . . ........ .. . . .. .. . ... . . .. . 

Independent agencies .... . . ..... .... . ... . .. . ........ . ......... . .... . . . 

Total expenses . ...... .. .............................................. . 

Excess of expenses over revenues .. . ... .. .. .. .. . .... .. ........ . ........ . 

The accompanying notes are an integral part of this statement. 

1988 1987 

473.7 392.6 

109.7 83.9 

337.1 303.3 

35.3 32.5 

7.8 7.5 

17.9 15.0 

17.5 18.0 

999.0 852.8 

82.2 52.3 

11 .9 13.3 

36.9 51.6 

1,130.0 970.0 

1.6 1.9 

1.4 1.2 

21 .8 24.2 

68.7 68.0 

2.3 2.5 

322.8 262.1 

18.8 12.9 

16.9 14.5 

374.4 357.5 

23.7 20.2 

5.7 5.7 

4.3 4.8 

27.1 24.9 

3.6 3.1 

26.8 9.8 

13.7 3.3 

168.9 166.2 

174.5 151 .5 

1,277.0 1,134.3 

-147.0 -164.3 
United States Government Consolidated Statement 

of Cash Flow for the Years Ended September 30, 1988 and 1987 

($ billions) 

Uses of funds 

Excess of expenses over revenues . . . ... ......... . ... .. • ...... . .......... .. ... . ..•....... 

Less charges not requiring cash in current period: 

Depreciation . . . . . . . . . . . . . . . . .... .. . . ........ . . .. ... .. ..... . .. . .... . .. . .. . ... . . . . . 

Pension and payroll benefits ... . .. .... .... . .•... . • .. .. . . . . . . .... . ......•... . . . . . . . . . ..... 

Interest . . . . . . . . . . . . . ..•.... . ......•..................•.. • ..•. . . . . . .... . 

Bad debts . .. . ............ . .......... • . . . ... .....•.... • . ..•......... • .. . .... . .. .. . . .. . 

Cash used in operations . . . .. . ... ... .. ............. .. . . . ... .. . .. . .. . ... .. ............ . . 

Purchase of property and equipment (net of sales of $12.2 in 1988 and $5.3 in 1987) . .. . .. . .. .. ......... . 

Increase in inventories ... 

Increase in miscellaneous assets . . . . ..... . . . . . ..... . . ... ... . ... .. .. . . . . .. ......... ..... . ... . . 

Total uses of funds ............. . .................. . . ....... .. .. .. ... ........... . ........ . 

Sources of funds 

Borrowing from the public 

Decrease in receivables .... .. .... . .. .. . . .. .. ... . ... .. . . . ...... . .. . . .. .. . ... . .. .. .... . ...... . 

Decrease in inventories ......... . . . .. . . 

Decrease in investments ..... . . .. . . . . . 

Decrease in miscellaneous assets . . .. . .. . 

Increase in liabilities . . . .. .. . .. . . . .... ... . ... . .. ... .... . .. . .. ..... .. .. . . .. . ......... . . . . .... . 

Total sources of funds .. ... . . . . .. . ..................................... ...... .. . .......... . 

Net increase in cash and monetary assets ... ... .. . . .... . .. . ...... . . . . . .. . ...... . . . . . .. .. . ... . .. . . 

Change in valuation of gold at market value ..... .. . ... . .. . ............. ..... . .. . ... .. . . . . .. • ... . .. 

Cash and monetary assets at beginning of year .... . .............. . ........ .. ... . .. .. ... . ... . ..... . 

Cash and monetary assets at end of year ......... . .. .... ... . ...... . ...... . ......... . . . .. . . . .. .. . . 

The accompanying notes are an integral part of this statement. 

13 

1988 1987 

147.0 164.3 

44.5 45.8 

7.8 5.8 

6.5 5.9 

17.8 17.5 

70.4 89.3 

59.8 165.1 

30.4 

26.9 --- 187.5 254.4 

141.5 157.2 

12.0 38.9 

3.2 

.7 .6 

52.4 

40.5 2.3 

194.7 254.6 

7.2 .2 

-16.2 

186.8 186.6 

177.8 186.8 
14 

United States Government Consolidated Statement 

of Receipts and Outlays as of September 30, 1988 and 1987 

($ billions) 

1988 

Actual Budget 1 

Budqet receipts 

Individual income taxes . . . . . . . . . . . . . . . . . . . . 401 .2 

Corporation income taxes . . . . . . . . . . . . . . . 94.2 

Social insurance taxes and contributions ..... .. 334.3 

Excise taxes . . . . . . . . .... . . 35.5 

Estate and gift taxes .. . . .. ... .. ... . . . . . . . .. 7.6 

Customs duties . . ... .. . .... . . .. . . . . . .. .. . 16.2 

Miscellaneous receipts . . . . .. . . . .... .. .. . ... 20.0 

Total budget receipts . ... . . . ... . .. .. .. . ... 909.0 

Budqet outlays 

Legislative branch . .. .. ... . ... . . . ... 1.9 

Judicial branch . . . . . . . . . . . . . . . 1.3 

Executive Office of the President . .1 

Funds appropriated to the President . 7.3 

Departments 

Agriculture . ... . . . ... . . . . .. . . . .. . .. . 44.0 

Commerce. . . . . ... ... . .. . .. . . . . . . ... 2.3 

Defense ..... . . . .. . . . . . . . . . .. . .. .. . . . . 304.0 

Education .. . . .. . . . . .. . .. . . .. .... . . .. .. 18.2 

Energy . .. . . . . . . . . . . . . . ..... .. . . . 11 .2 

Health and Human Services . . . 373.2 

Housing and Urban Development . . . . . . . . . . 19.0 

Interior ....... . ... ... ... . . . 5.2 

Justice . . . ....... . .. . . 5.4 

Labor . . .. . .. .... . . .. . .. . 21.9 

State .... . . . . . . . . ... . .... . . . . . .. . . .. 3.4 

Transportation . ... . . . .. . . . . ... . .. . . . 26.4 

Treasury . .. . . . . . . . .. . ... . . . . . .. . . . .. 202.5 

Independent agencies . . . .. 95.3 

Undistributed offsetting receipts. -78.5 ---

Total budget o utlays . . ........ . .. .. . . . .. . 1,064.1 

Total budget deficit . . . . ... . . . . . . . .... .... -1 55.1 

1 FY 1989 Budget of the U.S. Government, released by the Office of 

Management and Budget on Feb. 18, 1988. 

' 2 Midsession review of the FY 1989 Budget, released by the Office 

of Management and Budget on July 28, 1988. 

3 FY 1988 Budget of the U.S. Government, released by the Office of 

Management and Budget on Jan. 5, 1987. 

4 Midsession review of the FY 1988 Budget, released by the Office of 

Management and Budget on Aug . 17, 1987. 

393.4 

105.6 

331.5 

35.3 

7.6 

16.4 

19.4 

909.2 

1.9 

1.4 

.1 

5.2 

50.7 

2.5 

299.6 

18.8 

10.5 

375.1 

18.6 

5.4 

5.2 

22.0 

3.3 

26.3 

198.9 

88.1 

-77.7 

1,055.9 

-146.7 

1987 

Budget 2 Actual Budget 3 Budget 4 

405.2 392.6 364.0 392.8 

93.4 83.9 104.8 89.6 

335.0 303.3 30 1.5 301 .9 

34.7 32.5 32.6 31 .9 

7.6 7.5 6.0 8.1 

17.1 15.0 14.4 14.8 

20.4 19.3 19.1 19.4 

913.4 854.1 842.4 858.5 

1.9 1.8 2.1 2.1 

1.4 1.2 1.2 1.2 

.1 .1 .1 .1 

9.4 10.4 11.8 12.2 

46.9 49.6 55_·1 53.3 

2.5 2.2 2.4 2.5 

299.6 294.6 295.1 295.0 

19.0 16.8 16.8 17.5 

10.9 10.7 10.6 10.5 

374.6 351 .3 348.2 350.9 

19.5 15.5 14.6 15.6 

5.4 5.1 5.2 5.4 

5.2 4.3 4.8 4.6 

22.0 23.5 24.5 24.0 

3.3 2.8 3.3 3.0 

26.1 25.4 26.2 26.8 

202.3 180.3 180.2 182.9 

94.4 80.7 85.2 82.5 

-78.7 -72.4 -71.8 -73.2 --- 1,065.8 1,003.9 1,015.6 1,016.9 

-152.4 -1 49.8 -173.2 -158.4 = = 
United States Government Consolidated Statement 

of Reconciliation of Accrual Operating Results to the 

Cash Basis Budget as of September 30, 1988 and 1987 

($ billions) 

Expenses over revenues (current period results on accrual basis) ...... . . . .... .. . . 

Additions 

Capital outlays . . . . . ... . ... . . 

Net loan disbursements .... . 

Seigniorage .. . .. ... . . .. . . . .. . . . 

Total additions .. .... . ...... . .... . . . . . .. . . . . . . .. . ... . .. ...... .. . ... . .. . . 

Deductions 

Increase or decrease(-) in actuarial liabil ities . ... . . . . . .. . ... . . .. . . . . . . .... . ... . 

Increase or decrease (-) in allowances ......... . .. . . .. . . . .. ... . . .. . . . .. . . . .. . 

Depreciation expense . . . . . . . . . . . . . . . . ... .. .. .. .. .. . . . . . 

Other: 

Net accrual adjustments 

Net agency accrual adju stments .. 

Total deductions .... . . . ... ... . ..... . .... .. ................ . ........ . .. . 

Reported budget outlays over receipts (cash basis) .. .... . ... . ... . .. . ... . ....... . 

15 

1988 1987 

147.0 164.3 

72.0 129.5 

-8.0 19.0 

.5 .5 

64.5 149.0 

-8.0 21.1 

-9.6 17.5 

44.5 45.8 

43.9 

-14.4 79.1 

56.4 163.5 

155.1 149.8 
16 

Statement of Price Waterhouse 

Director, Accounting Group 

Financial Management Service 

We are pleased to have had the opportunity to consult with the Financial Management Service 

(FMS) regarding the new process for preparing the 1988 Prototype U.S. Government Consolidated 

Financial Statements (Consolidated Financial Statements). The new process involves accumulating 

and consolidating financial information submitted by all of the departments and agencies that conduct 

and administer the Federal government's programs. At your request we have (1) read the sections of 

the Treasury Financial Manual and related Bulletins that govern preparation of the Consolidated Financial Statements, (2) reviewed the bases of Treasury's adjustments of information submitted by 

departments and agencies, (3) reviewed Treasury's procedures for identifying all Federal entities to be 

included in the Consolidated Financial Statements, (4) reviewed Treasury's procedures for accumulating and summarizing information submitted by departments and agencies and (5) observed Treasury's 

efforts to compare submitted information with other Treasury data, 0MB data, GAO reports , and reports of independent accountants and consultants. This letter includes a summary of our more important observations about Treasury's financial statement preparation process. 

Overall , we believe the new FMS process established for preparing the Consolidated Financial 

Statements is an important step forward in the efforts to improve the reliability and usefulness of the 

Consolidated Financial Statements. Nevertheless, we believe it is necessary to recognize that the 

process requires a number of significant refinements before the resulting Consolidated Financial 

Statements can be viewed as providing reliable financial information and the "Prototype" description is 

removed. 

Improving the reliability of the Consolidated Financial Statements will involve ( 1) obtaining more 

accurate financial information from the departments and agencies, (2) improving some of Treasury's 

accumulatiqn and report preparation practices, and (3) resolving a number of important accounting 

issues. 

The majority of the department and agency financial information from which the Consolidated 

Financial Statements are derived has not been subjected to either an internal or external independent 

audit or review process. Such audits or reviews would provide increased assurances as to the 

reliability of the information submitted and its recording in accordance with appropriate accounting 

principles. It is our view that considerable additional effort must be put forth in improving the reliability 

of information submitted to Treasury by the departments and agencies. 

Treasury's accumulation and summary process, while detecting many errors, does not identify all 

significant errors which a more detailed review process would identify and correct. In other cases, it is 

necessary to record significant adjustments for amounts agencies do not report. Finally, the process 

requires many adjustments of agency submitted information, some of which is not accompanied by 

adequate supporting documentation. 

There continue to be a number of important accounting issues being studied by GAO, 0MB, 

Treasury, and others, the resolution of which could have a significant effect on the Consolidated Financial Statements. For example, whether or not military hardware should be capitalized and 

depreciated and whether Social Security obligations should be recorded in the Consolidated Financial 

Statements still must be resolved. 

We recognize that the matters discussed herein which affect the rel iability of the Consolidated 

Financial Statements are not entirely within Treasury's direct control. Resolving problems associated 

with the quality of agency submitted information as well as important accounting issues will involve a 

concerted effort by the entire Federal government financial community. Nevertheless, resolution of 

these matters is essential to improving the reliabi lity and usefulness of the Consolidated Financial 

Statements. 

Because this is a consulting engagement, we did not audit or review the Consolidated Financial 

Statements in accordance with generally accepted auditing standards, and accordingly, we do not express an opinion or any other assurance on the 1988 Prototype U.S. Government Consolidated Financial Statements or any of its components. 

June 8, 1989 
17 

NOTES TO FINANCIAL STATEMENTS 

1. Summary of significant accounting policies 

Reporting entities 

The Consolidated Financial Statements include 

the legislative, judicial, and executive branches and 

federally chartered corporations . 

Significant intragovernmental transactions were 

eliminated in consolidation . 

The Federal Reserve banks and certain congressional activities are excluded, and so are 

Government-sponsored enterprises such as the Federal land banks because they are privately owned. 

Basis of accounting policies 

The Consolidated Financial Statements are prepared in accordance with Generally Accepted Accounting Principles (GAAP) applicable to the Federal 

Government in line with Title 2 of the GAO Policy and 

Procedures Manual for Guidance of Federal Agencies.The Statements of Financial Position, Operations, 

and Cash Flow are presented on the accrual basis of 

accounting. The Statement of Receipts and Outlays 

displays the budget deficit on a cash basis. The Statement of Reconciliation of Accrual Operating Results to 

the Cash Basis Budget presents a reconciliation of the 

budget deficit on the cash basis to the operating results on the accrual basis. Statements have been restated to reflect subsequent changes to the prior-year 

financial information. (See notes 13 and 14.) 

Principal financial statements 

These consist of a Statement of Financial Position, a Statement of Operations, a Statement of Cash 

Flow, a Statement of Receipts and Outlays, and a 

Statement of Reconciliation of Accrual Operating Results to the Cash Basis Budget. 

Fiscal year 

The fiscal year of the U.S. Government ends on 

September 30. 

Sources of information 

The fiscal 1988 Statement of Financial Position 

and the Statement of Operations have been compiled 

from agency reports required by I TFM 2-4100, Federal Agencies' Financial Reports. The Statement of 

Receipts and Outlays has been taken from the 

Monthly Treasury Statement. Selected amounts from 

the Treasury general ledger have been added. Certain 

adjustments have been made to supplement information supplied by the agencies such as other monetary 

assets, unearned revenue, depreciation, other assets, 

pensions and actuarial liabilities, other liabilities, and 

allowance for losses. 

2. Cash 

This represents deposits of tax collections, customs duties, other revenues, miscellaneous receipts, 

public debt receipts, and a variety of other receipts 

maintained in accounts at Federal Reserve banks and 

branches as well as in the U.S. Treasury tax and loan 

accounts. The Federal Reserve banks and branches 

act as fiscal agents for the Government by reporting 

·transcripts on a daily basis. The tax and loan accounts 

refer to accounts of special depositaries in which the 

proceeds of certain tax payments and public debt 

sales are held until the funds are needed at the Federal Reserve banks and branches to meet cash disbursements from Treasury's general account. 

Accounting for outlays is on the basis of checks 

issued and cash payments made; therefore, "Other 

liabilities" is credited for checks issued, until they are 

cleared through the Federal Reserve banks. 
18 

3. Other monetary assets (consist of the items 

summarized below) 

Sept. 30, Sept. 30, 

1988 1987 

($ billions) 

Gold (at market value of $397.75 per ounce as 

of Sept. 30, 1988, and $459.25 as of Sept. 

30, 1987) ... . ......... .. ... .. .. . . 104.2 120.5 

Special drawing rights .... . . .. . .. .. . .... . 9.1 9.1 

U.S. reserve position in the International 

Monetary Fund .... ................ . 9.4 10.9 

Accountability for cash and other assets 

held outside the Treasury ... . ......... . 8.8 8.1 

Other U.S. Treasury monetary assets . . .. .. . 1.6 1.4 

Nonpurchased foreign currencies ...... .. . . .3 .4 

133.4 150.4 

Gold 

The statutory price of gold is $42.2222 per ounce. 

The market value has been used for FY 1988 and 

retroactively for FY 1987 to establish a proper basis of 

comparison. The market value represents the price 

reported for gold on the London fixing, and is based 

on 262,005,370.106 and 262,291,336.059 fine troy 

ounces as of September 30, 1988 and 1987, respectively (as reported by the Treasury general ledger) . 

One of the accounting issues being studied by 

GAO is how refined precious metals including gold 

should be valued in the Consolidated Statement of 

Financial Position. Valuing gold at market value is in 

accordance with acceptable accounting principles and 

is consistent with the current preliminary GAO 

position. 

Special drawing rights 

The value is based on a weighted average of exchange rates for the currencies of selected member 

countries . The value of a special drawing right was 

$1 .29039 and $1.2766 as of September 30, 1988 and 

1987, respectively. 

4. Accounts and loans receivable 

All receivables in the Statement of Financial Position are shown net of allowances for losses. The allowances for losses are those reported by the agencies and include certain adjustments to supplement 

these totals. 

Summary of net accounts and loans receivable 1 

Accounts 

receivable 

Loans 

receivable 

1988 1987 1988 1987 

Beginning balance, Oct. 1 . ... .. . 67.6 

Additions to receivables . .... . 90.7 

Repayments and reclassifications ..... . ...... . .... . -80.1 

Amounts written off . . .. . . . . . . -7.6 

Ending balance, Sept. 30 .... .. . 70.6 

1 Excludes intragovernmental receivables. 

5. Inventories 

Operating consumables .... . ... . . . 

Product or service components .... . 

Stockpiled materials . . .... . . ... .. . 

Other . .. ... . . ....... .. .. ... .. . . . . 

($ billions) 

68.6 

85.2 

-84.8 

-1.4 

67.6 

Sept. 30, 

1988 

194.8 

31 .1 

-25.5 

-20.6 

179.8 

232.7 

29.7 

-64.8 

-2.8 

194.8 

Sept. 30, 

1987 

($ billions) 

129.9 121.3 

46.1 14.2 

32.7 44.7 

3.8 1.9 

212.5 182.1 

Product or service components contain amounts 

reported in goods-for-sale, work-in-process, and raw 

materials. Agencies have reported inventory totals net 

of allowance accounts, where appropriate. 

Agencies disclosed their costing method for inventory totals. The first-in-first-out valuation method was 

used more often than moving or weighted averages or 

last-in-first-out valuations. However, the Department of 

Defense used the moving average valuation more often than weighted average or last-in-first-out or firstin-first-out valuations. Several agencies reported estimated inventory amounts. 
INVENTORIES BY MAJOR AGENCY 

$ BILLIONS 

175 

140 

105 

70 

35 

0 

Defen se Energy Agriculture Other 

6. Investments 

The amount for fiscal 1988 represents agency 

investments in non-Federal securities and other investments. Ninety-eight percent of the total amount 

reported was recorded at face value. 

7. Property, plant and equipment 

Sept. 30, 

1988 

Sept. 30, 

1987 

($ billions) 

Structures , facilities and leasehold 

improvements . . . . . .. . .... ..... . 169.9 161 .4 

Military equipment. ... . .. . . . .... . . . 415.1 435.4 

Equipment . ... ....... .. . .. . ... . . . 68.6 69.9 

Construction-in-progress .. . . ... . . . . . 58.1 76.6 

Land .. . ...... .. . . .. ... . . . .. . . . . 11 .7 11 .5 

Other ........ ... ..... . . .. .. . . . . . 14.9 14.3 

738.3 769.1 

Less accumulated depreciation .. . . 301 .2 315.2 

437. 1 453.9 

"Other" includes ADP software, assets under capital lease, and other fixed assets that have been capi19 

talized. The amounts shown for fiscal 1988 and 1987 

are reported at cost. 

Land purchased by the Federal Government is 

valued at cost. The land acquired through donation, 

exchange, bequest, forfeiture, or judicial process is 

estimated at amounts the Government would have 

paid if purchased at the date of acquisition. 

Pending the outcome of a General Accounting 

Office study to determine how land and natural resources should be valued, the Outer Continental Shelf 

and other offshore lands and more than 662 million 

acres of public domain land have been assigned a 

minimal value of $1 per acre. 

Depreciation accounting is encouraged for all 

depreciable fixed assets, but only business-type operations are required to report depreciation on their 

financial statements. 

The accumulated depreciation shown in the Statement of Financial Position is estimated using the 

straight-line method applied to the total of reported 

depreciable assets. The useful lives applied to each 

classification of asset are: 

Buildings . . . . . . . . . . . . . . • . . 50 years 

Structures and facilities . . . . .. 21 years 

Ships and service craft . . . . . . 13 years 

Industrial plant equipment . . . . 13 years 

All other assets . . . . . . . . . . . 13 years 

The amounts of accumulated depreciation reported by Federal agencies on their statements for 

business-type operations amounted to $33. 7 billion 

and $31.4 billion for fiscal 1988 and 1987, on assets 

of $99.9 billion and $105.0 billion for fiscal 1988 and 

1987, respectively. The straight-line depreciation 

method is used more often for overall fixed assets. 

Capitalization policies varied greatly with thresholds in 

the ranges of $500 to $5,000. 

The majority of agencies use a useful life range of 

3-5 years for ADP software and 6-10 years for equipment. For structures and facilities , the majority of 

agencies use a service life greater than 16 years. 
20 

8. Other assets 

Other assets reported are summarized in the following table, by agency. 

Sept. 30, 

1988 

Sept. 30, 

1987 

($ billions) 

Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.7 22.4 

U.S. Postal Service . ... .. . . ... . . . ..... . 20.5 18.5 

Funds appropriated to the President. ..... . 7.6 .2 

Federal Savings and Loan Insurance Corp . . 7.3 5.8 

Defense. . . . . . . . . . . . . . ............. . 6.8 6.4 

Other (State, Energy, Federal Deposit 

Insurance Corp., et al.) . ... . . ... .. . .. . 21 .2 16.8 

Total . . ... ... . ...... . . . .. . .. . . . . 87.1 70.1 

9. Unearned revenue 

Unearned revenue is summarized in the following 

table , by agency. 

Sept. 30, 

1988 

Sept. 30, 

1987 

($ billions) 

Funds appropriated to the President . . . . . 11.2 

Housing and Urban Development . . . . . . . 5.6 4.8 

U.S. Postal Service . . . . ... . .. .... .. .. . 1.7 1.5 

Agriculture .... ...... . . .. . .. . .... . . . 1.2 .5 

Energy .. . ............ . ... . . . .. .. . . 1.1 .2 

Other .... .. ............. . ........ . . 1.3 .9 

Total . . ... . . ... .............. . 22. 1 7.9 

10. Debt issued under borrowing authority 

The amount of Federal debt outstanding is reported net of unamortized premiums and discounts. 

The amounts reported for fiscal years 1988 and 1987 

reflect a reduction for intragovernmental holdings of 

$566.9 billion and $450 .3 billion, respectively. 

Agencies also reported $12.4 billion and $6.3 billion of other debt which is included in the fiscal 1988 

and 1987 amounts, respectively. 

Sept. 30, 1988 Sept. 30, 1987 

Average Average 

interest Total interest Total 

rate debt rate debt 

(percent) ($ bil.) (percent) ($ bil.) 

Public debt 

Marketable .. .. . . ..... . 8.770 1,774.0 8.575 1,647.6 

Nonmarketable . .. ..... . 7.841 261 .1 6.772 231 .9 

Other ..... . ....... .. . . 8.830 .3 7.972 20.5 

Total ........... . . . . 2,035.4 1,900.0 

Federal debt held by the public 

Current period .. . ...... . 1

2,047.8 1,906.3 

Prior period . . . . . ... . . . . 1,906.3 1,749.1 

Net increase .... .. ..... . . 141 .5 157.2 

1 Includes other debt($ bill ions): 

1988 1987 

Agriculture Dept .. .... .. 1.0 

Education Dept ......... .4 

Federal Deposit Insurance 

Corp ... . . .... . ... 0.9 

Federal Savings and Loan 

Insurance Corp ... .. .. 9.7 4.4 

Tennessee Valley Authority 1.4 

U.S. Postal Service . . ... . .3 .1 

Veterans Administration .. .2 

Miscellaneous .......... .1 .2 

Total .. .. . . . . . . . .. . . 12.4 6.3 

11. Pensions and actuarial liabilities 

The Federal Government administers over 40 

pension plans. The largest are those administered by 

the Office of Personnel Management for civilian employees and the Department of Defense for military 

personnel. These plans comprise over 93 percent of 

the pension liability reported at September 30, 1988. 

The majority of the pension plans are defined benefit 

plans. 

The accounting for accrued pension, retirement, 

disability plans and annuities is subject to several different assumptions, definitions, and methods of calculation. Each of the major plans is summarized in the 

following. 
Sept. 30, Sept. 30, 

1988 1987 

($ billions) 

Pensions--accumulated benefits obligation 

Military personnel. ... . ....... . 457.1 446.2 

Civilian employees (CSRS and 

FERS) ....... . 548.1 570.3 

Other pension plans .. .. . .. . . . . ... . 71.5 75.3 

Subtotal .... ... .... . . .. ..... . . 1,076.7 1,091 .8 

Actuarial liabilities 

Veterans compensation . .... . . ... . . 139.9 136.5 

Federal employees compensation ... . 14.1 12.7 

Other benefits .. . .. . 26.3 24.0 

Total .. ..... . . . . . . . . . . . . .. . . . . 1,257.0 1,265.0 

Military personnel and civilian employees 

The liabilities under these plans represent a major 

portion of the unfunded liability which is to be reported 

under Public Law 95-595. The accrued pension 

liabilities at September 30 represent the actuarial 

present value of the accumulated plan benefits and 

have been calculated in accordance with instructions 

developed jointly by the General Accounting Office 

and the Office of Management and Budget under the 

provisions of Public Law 95-595. Periodic pension cost 

is, in effect, calculated by the "unit credit" method. 

The latest available information for military personnel and civilian employees pensions is September 30, 

1987. For fiscal 1987, data from fiscal 1986 were 

used. 

Veterans compensation 

The future liability for compensation and pension 

benefits represents the present value, using an 8.8-

percent discount rate, of projected annual benefit payments. Projected benefit payments are based on assumed cost-of-living increases ranging from 2.6 percent to 4.0 percent for 1989 to 1993 and 2.1 percent 

to 4.0 percent thereafter. In addition, the mortality and 

accession rates used are based on trends in the current veteran population. 

This calculation was not based on an independent 

actuarial study, and thus there is a risk that the assumptions and methods underlying it may not be 

reflective of actual economic and demographic trends 

affecting veterans. 

21 

The present value of the estimated future liability 

for compensation and pension benefits payable for the 

next 5 fiscal years and thereafter is as follows : 

($ billions) 

1989 . . . . . . . . . . . • . . . . . . . . . . . . . . 14.0 

1990 .......... .... 12.8 

1991 .. . . . .. . . .. .......... . .. . . 11 .8 

1992. . . . . . . . . . . . . . . . . . . . . . . . . . 10.8 

1993 . . . . . . . . . . . . . . . . . . . . . . . . . . 9.8 

Thereafter.. . .. . . .. . . . . . . . 80.7 

Total. . . .. . . ... ... . .. .. . . .... 139.9 

Federal employees compensation 

This amount represents the estimated future costs 

for approved Federal Employees' Compensation Act 

cases. 

Other pension plans 

Other annual pension reports received from plans 

covered by Public Law 95-595 are reported in the 

same manner as military personnel and civilian employees described above. 

Other benefits 

Other benefits consist of various items the Government is responsible for such as life insurance and 

health benefits for veterans and Federal employees. 

The Thrift Savings Plan is a retirement savings 

and investment plan for Federal employees authorized 

by Congress in the Federal Employees' Retirement 

System Act of 1986. It is a defined contribution plan 

eligible to employees covered under the Civil SeNice 

Retirement System (CSRS) and the Federal Employees Retirement System (FERS). The plan offers both 

FERS and CSRS employees tax deferral advantages. 

FERS employees may contribute up to 10 percent of 

basic pay per pay period to the plan; CSRS employees may contribute up to 5 percent of basic pay per 

pay period. Total individual's contributions could not 

exceed $7,313 in 1988. The plan was started in April 

1987 and as of September 30, 1988, the total invested 

was over $2.0 billion. 
22 

12. Other liabilities 

Other liabilities reported are summarized in the 

following table, by agency. 

Sept. 30, Sept. 30, 

Treasury .... .... ... ... .. . . . 

Federal Savings and Loan Insurance Corp ... 

Federal Deposit Insurance Corp ... 

Defense . . .. .... . . 

1988 1987 

($ billions) 

116.0 111 .1 

25.6 12.8 

4.5 3.0 

4.9 2.0 

Interior . . . . . . . . . . . . . . . . . . . . . . . . 3.2 2.0 

Tennessee Valley Authority. . . . . . . . . . . . . 3.0 2.3 

Other . . . . . 5.5 4.3 

Total .. 162.7 137.5 

13. Accumulated position 

Sept. 30, Sept. 30, 

1988 1987 

($ billions) 

Accumulated position beginning of 

period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2, 196. 7 

Accumulated position beginning of 

period, as restated . . . . . . . . . . . . . -2,289.4 

Current period results . . . . . . . . . . . . . . . . . . . - 147.0 -164.3 

Change in market value of gold . . -16.2 

Accumulated position prior to 

restatement, as previously reported 

Restated for: 

Change in other monetary assets .. 

Change in property, plant and 

equipment ......... ... . . . 

Change in other assets .. . 

Change in unearned revenue .......... . 

Change in pensions and actuarial 

liabilities ........... ............ .. . 

-2,361 .0 

95.4 

.9 

-76.8 

35.1 

12.2 

Change in other liabilities . . . . . . . . . . . . . . . 4.8 

Accumulated position end of period . -2,452.6 -2,289.4 

Th·e accumulated position represents the exc~ss 

of liabilities over assets. It has been restated to reflect 

prior-period adjustments identified in the above table. 

14. Prior-period adjustments and reclassifications 

The Consolidated Financial Statements include, in 

fiscal 1988, adjustments to prior years' figures, which 

were necessary due to changes in interpreting financial information in the fiscal 1987 statements. The 

changes concerned the following accounts: Other 

monetary assets, property, plant and equipment, unearned revenue, pensions and actuarial liabilities, 

other assets, and other liabilities. After adjustments, a 

net increase of $71 .6 billion affected the accumulated 

position for fiscal 1987. 

In addition to these adjustments, amounts shown 

in the Statement of Operations were reclassified and 

adjusted to provide for more accurate amounts within 

each category and to enhance presentation. 

15. Leases 

Federal agencies were first required to provide 

financial information about lease commitments in 

1986. Agencies are attempting to accumulate the desired lease information that is required. At September 

30, 1988, the future aggregate minimum rental commitments for capital leases and noncancelable operating leases were : 

Operating Capital 

leases leases 

($ billions) 

Years ending Sept. 30,--

1989 . .. . . . . ... .. . . . . . . .. .. .. . . 1.2 2.4 

1990. .. ... . .. .... . . ... .. . . . ... . 1.1 .2 

1991 ... . . . . . . ....... .. ..... . ..... . . .9 .2 

1992 ...... ... .... .... .. . . ......... . .7 .2 

1993 ... ... .. ............. . .. . . . ... . .5 .2 

Thereafter ... ... .. . 1.6 1.4 

Total minimum lease payments . . . . . . . 6.0 4.6 

The majority of these lease commitments relate to 

building and office space rental. The current and 
long-term portions of lease costs are included in accounts payable and other liabilities, respectively. lntragovernmental leasing transactions have not been 

eliminated or identified due to a lack of information. 

Lease revenues identified on the agency statements were negligible and appear to be understated. 

16. Social security 

The liability equaling the amortized portion of the 

unfunded liability for the social security program is not 

included in the Statement of Financial Position. The 

unfunded liability is determined annually and the prior 

service cost is amortized over a 30-year period. As of 

September 30, 1988, the unfunded liability for social 

security is $5,739.6 billion, of which $2,596.1 billion is 

recorded through amortization. The amounts for September 30, 1987, are $5,580.1 billion and $2,411.7 

billion, respectively. The liability represents the present value of the projected excess of future benefit payments to prese_nt participants over the contributions 

still to be made by the same group and their employers for the next 75 years. 

The Congress and the trustees of the funds prepare estimates based on a different financing method 

they regard as more appropriate for social insurance 

programs. The following actuarial amounts are calculated on the assumption that future young workers will 

be covered by the program as they enter the labor 

force . 

Actuarial liabilities .... ... . ....... . . .. . . . 

Actuarial assets .. . .. . . . . ...... . . .. . . .. . 

Actuarial surplus or deficit(-) .......... . .. . 

17. Contingencies 

Sept. 30, Sept. 30, 

1988 1987 

($ billions) 

15,480.0 14,983.4 

14,816.0 14,605.8 

-664.0 -377.6 

A contingent liability is a liability involving uncertainty as to a possible loss to the Government that will 

be resolved when one or more future events occur or 

fail to occur. If the future event or events are likely to 

occur and the amounts can be reasonably estimated, 

the liabilities are reported in the Statement of Financial 

Position under "Other liabilities." Contingencies within 

the Federal Government result from a number of 

23 

sources including loan and credit guarantees, insurance programs, and unadjudicated claims. 

The following table shows the contingent liabilities 

reported in the Statement of Financial Position for 

losses that are likely to occur and the maximum risk of 

exposure that the Government has without regard to 

probability of occurrence and without deduction for 

existing and contingent assets which would be available to offset potential losses. 

Sept. 30, 1988 Sept. 30, 1987 

Maxi• Maximum Liabil• mum Liabilrisk ity risk ity 

($ billions) 

Insurance in force . .. .. . . 3,292.2 19.4 3,1 20.6 7.0 

Government loan and 

credit guarantees .. . .. . 888.6 1.6 845.0 .4 

Unadjudicated claims . . . . . 1365.5 75.5 

Other contingencies .. . . . . 23.7 28.9 

21 .0 7.4 

1 Includes $304 billion due to litigation against the Dept. of Energy. 

The administration estimates the total cost of 

protecting deposits in insolvent thrift institutions will be 

about $90 billion : $40 billion resulting from FSLIC's 

over 200 resolutions in 1988; and $50 billion to be 

spent over the next 3 years to resolve about 500 more 

institutions. An additional $24 billion will be made 

available over the next 10 years to the Savings Association Insurance Fund for any additional losses 

through 1999. Under the administration's financing 

plan, the industry will pay the principal on the $50 billion bond issuance when the principal comes due. To 

do this the industry will purchase zero coupon Treasury securities over the next 3 years that, when they 

mature, will equal $50 billion. The Treasury's share of 

the interest costs on the bonds should be about $92 

billion over the life of the bonds. 

The Department of Energy is faced with a possible 

future liability of $95 billion to clean up nuclear waste : 

$90 billion to clean up the environment, extending for 

a period beyond the year 201 O; and $5 billion to correct safety problems in nuclear facilities, extending to 

2010. 
24 

18. Audited financial statements 

A review showed that approximately 31 percent of 

agencies' total assets were audited by the end of FY 

1988. As this percent increases, the quality of the data 

used to prepare this report will improve proportionally 

as will the usefulness of the results in making financial 

decisions. A recap of activity from agencies audited is 

provided below and identifies those organizations 

reviewed. 

Financial Quality Performance Measures 

STATUS OF ENTITIES AUDITED 

NUMBER OF ENTITIES AUDITED, UNAUDITED(·) 

300 ----------------, 

200----

100 -+----

0 -+-----

-100 --------1 

-200 --------i 

-300 --------i 

-400 

-500 .....__ ____________ __ 

ASSETS AUDITED, UNAUDITED(·), $ BILLIONS 

Entities summarized in the preceding charts as 

audited consisted of the following : 

Agriculture 

Housing and Urban Development 

Labor 

Treasury: 

Financial Management Service 

Federal Financing Bank 

Comptroller of the Currency 

Bureau of Engraving and 

Printing 

Veterans Administration 

Social Security Administration 

Environmental Protection Agency 

General Services Administration 

Government Printing Office 

Independent agencies (47) 
SUPPLEMENTAL TABLES 

SUMMARY OF ACCOUNTS AND LOANS RECEIVABLE DUE 

FROM THE PUBLIC 

25 

Total accounts receivable amounted to $95.4 billion in FY 1988, an increase of $4.3 billion over FY 1987. 

Total loans receivable amounted to $212 .9 billion in FY 1988, a decrease of $25.9 billion from FY 1987. Graphically depicted below are summaries by selected agencies of accounts and loans receivable data. Treasury accounts receivable includes IRS, 60.6 percent. 

ACCOUNTS RECEIVABLE 

$95.4 billion 

Health and Human Services 

0 10 20 30 40 50 

Percent 

Agriculture 

Funds ApRropriated 

to the President 

Housing and 

Urban Development 

Treasury 

Other 

0 

60 

5 

64% 

70 

LOANS RECEIVABLE 

$212.9 billion 

18% 

10 15 20 25 30 35 40 45 50 55 

Percent 

The Debt Collection Act of 1982 (31 U.S.C. 3719) requires the Director of the Office of Management and 

Budget, in consultation with the Secretary of the Treasury and the Comptroller General of the United States, to 

establish regulations requiring each agency with outstanding debts to prepare and transmit to 0MB and the 

Treasury a report which summarizes the status of accounts and loans receivable managed by each agency. 

These receivables result from a wide range of Federal activities including tax assessments; sale of Government 

services such as satellite launchings ; sale of Government goods such as natural resources from Federal lands; 

overpayments to annuitants; and various loan programs such as student and housing loans. The data in the reports will enable the Federal Government to improve collection activity. 

The amounts in the graphs and the following tables have been summarized from the Report on Accounts 

and Loans Receivable Due from the Public (SF 220-9) and include some adjustments. This schedule reflects all 

receivables reported by Federal agencies. 
26 

Accounts and Loans Receivable by Agency 

($ billions) 

Accounts receivable 

1988 1987 

Legislative branch ................... . ... . ... . . . .. . . . . 

Executive branch 

Funds appropriated to th e President . . ... . . . . . .. . . . 1.5 2.1 

Departments 

Agriculture ... . . . . . ...... ........... . . . . .. .. .. . . . 10.9 10.0 

Commerce . .. . . . . .... .. .. . . . ... .. .. . .. .. . . . . . .. . .1 .1 

Defense ..... . .. . . ... . . . . . .. .. .. . . . ..... . .. .. . . . 1.7 1.5 

Education . . . . .... .. . . . ........ .. ... • ...• • .• • . . . .5 .6 

Energy ...... . . . . . . . . . .. . ... .. . .. ....... . 4.3 2.3 

Health and Human Services . . .. . . . ... .. .. . .. .. . 3.2 3.1 

Housing and Urban Development. .... .. .. . . ...... . . . 1.2 3.6 

Interior . . . . . ....... .. . . .. . . .. .. . ... . 2.2 2.1 

Justice. ..... .. ... . .... .. ..... .... .. . .8 .6 

Labor . . . . . . •... . .. ..... . .... . . . .. . . . . 1.6 3.6 

State ... . . .. .. ... . . .. . . . . . ... . ..... .. .. . . . . .. . . 

Tran sportation . . . . . .. . ... . . . . . .. . . .. ... .. . . . ... . . .1 .1 

Treasury . . . ......... . .. .. .. .. ... . . ... . . . .. . . '61.0 55.6 

Veteran s Administration ...... . .... ...... ...... . . . .. . 3.0 2.4 

Other independent agencies . . .... .. . . 3.3 3.4 

Gross receivables .. . .... . ... . . . ......... . ... . 95.4 9 1.1 

Less allowances for losses ............... . . . . . 24.8 23.5 

Net receivables due from the public . . ...... . . . 70.6 67.6 

Loans receivable 

1988 1987 

24.5 22.3 

117.5 126.4 

.6 .8 

1.8 

7.0 6.3 

.1 

.8 .7 

13.4 29.4 

.2 .7 

1.7 2.0 

19.0 22.2 

2.2 2.4 

24.1 25.6 

212.9 238.8 

33.1 44.0 

179.8 194.8 

Aging Schedule of Accounts and Loans Receivable as of September 30, 1988 

Delinquent 

1-30 days .... . .. . ... .. . .. .. . .. ... . .... . ..... . 

31 -60 days......... . . ............ .. . 

6 1-90 days ... . . . .... . . .. •. . ............. .. 

9 1-180 days .... . . . . . . . .. . . . ........ . 

181 -360 days . . . . . .. . . ... . . . ..... .. . . ... . .. . ... . . . 

Over 360 days . . . . . . . . . . •. . . .. .. . ...... .. 

Total delinquent . .. .. . . ... . .. ... . . . . .. .. . 

Not delinquent .. 

Noncurrent receivables ... ... .. ... . . .. .. . .... . .... . 

Total gross receivables . ... .. .... .. ....... .. . 

* Less than $50 mill ion. 

' Totals reported by the Internal Revenue Service for gross delinquent taxes for fi scal 1988 and 1987 were $56.6 bi llion and $5 1.2 

billion, respectively . 

Accounts 

receivable 

($ bil.) 

5.3 

2.9 

2.1 

7.5 

9.5 

43.8 

71. 1 

15.2 

9.1 

95.4 

Percent Loans ·percent 

delinquent receivable delinquent 

($ bil.) 

7.4 0.5 3.4 

4.1 .3 1.7 

3.0 .3 1.6 

10.6 .7 4.2 

13.4 2.8 17.3 

61 .5 11 .7 71.8 

100.0 16.3 100.0 

22.7 

173.9 

212.9 
27 

FEDERAL DEBT 

Total Federal debt held by the public amounted to $2,047.8 billion in FY 1988, an increase of $141 .5 billion from FY 1987. This chart has been presented to graphically show the increase in Federal debt and the interest expense. 

$ 

B 

I 

L 

L 

I 

0 

N 

s 

2500 

2000 

1500 

1000 

500 

0 

FEDERAL DEBT HELD BY THE PUBLIC WITH 

INTEREST EXPENSE, FY 1978-88 

Federal Debt Held by the Public 

Interest Expense 

1978 1980 1982 1984 1986 1988 

The public debt table which follows reflects information on the borrowing of the Federal Government 

needed to finance the Government's operations. This table supports the balance sheet caption, "Debt issued under borrowing authority," which is shown net of intragovernmental holdings and unamortized premium or discount. lntragovernmental holdings represent that portion of the total Federal debt held by Federal entities, including the major trust funds. 

The distribution of 1988 net borrowing from the public by major source category is graphically depicted. 

1988 

NET BORROWING BY MAJOR 

SOURCE CATEGORY 

( NOTES ) 

BILLS 

1987 

1200 

1000 

800 

600 

400 

200 

0 

$ 

B 

I 

L 

L 

I 

0 

N 

s 
28 

Summary of Public Debt Outstanding as of September 30, 1988 and 1987 1 

Marketable 

Bills ... . 

Notes ...... . 

Bonds . 

Non marketable 

Foreign government series ... . .. ... . . ... .. .. . . . . . . .... ... . . . .... . 

Government account series ...... .. . . ........... .... ...... . . . 

U.S. savings bonds ......... . . . ... . . . . . . . .. . . . . . . ....... . . 

Other. 

Other 

Agency series 

Other . . .. . .. .... .••.....•.............••. 

Total. ..... . ..................... . .... .... . . . . ... . ... ...... . 

1 Administered by the Bureau of the Publ ic Debt, Department of 

the Treasury. 

2 Net of intragovernmental holdings of $566.9 billion and $450.3 billion, 

respectively, including unearned premiums and discounts. 

Types of marketable securities 

Bills--Short-term obligations issued with a term of 1 year or less . 

1988 

Average 

interest 

rate 

(percent) 

7.329 

8.848 

10.220 

Total 

debt 

($ bil.) 

389.0 

1,086.1 

298.9 

8.770 1,774.0 

7.498 

9.523 

7.076 

8.409 

7.841 

8.830 

8.830 

6.3 

.6 

106.2 

148.0 

261 .1 

.0 

.3 

.3 

2 2,035.4 

Notes--Medium-term obligations issued with a term of at least 1 year, but not more than 1 O years . 

Bonds--Long-term obligations of more than 10 years. 

1987 

Average Total 

interest debt 

rate ($ bil.) 

(percent) 

6.340 371 .3 

9.056 1,003.0 

10.330 273.3 

8.575 1,647.6 

6.877 4.3 

6.997 .8 

7.309 97.0 

5.907 129.8 

6.772 231.9 

7.250 3.0 

8.695 17.5 

7.972 20.5 

2 1,900.0 
29 

COMMITMENTS AND CONTINGENCIES 

Commitments are long-term contracts for which appropriations have not been provided by the Congress 

and undelivered orders which represent obligations. 

A contingency is a liability involving uncertainty as to a possible loss to the Government that will be resolved when one or more future events occur or fail to occur. If the future event or events are likely to occur and 

the amounts can be reasonably estimated, the liabilities are reported in the Statement of Financial Position under 

"Other liabilities." Contingencies within the Federal Government result from a number of sources including loan 

and credit guarantees, insurance programs, and unadjudicated claims. 

Irr FY 1988, total commitments amounted to $54~.4 billion and total contingencies amounted to $4,570.0 

billion. Total contingencies represent the maximum risk of exposure without regard to probability of occurrence 

and without deduction for existing and contingent assets which would be available to offset potential losses. The 

charts below show the percentage distribution of 1988 commitments and contingencies by source category. 

Undelivered Orders 

Long-Term Contracts 

0 

COMMITMENTS 

$542.4 billion 

3% 

20 40 60 

Percent 

CONTINGENCIES 

(Maximum Risk) 

Insurance in Force 

Gov't Loan and 

Credit Guarantees 

$4,570.0 billion 

"1 I, 

I .. 

80 

Unadjudicated Claims 

and Other Contingencies 

~ 

I 

-------- 0 20 40 

Percent 

60 

100 

72% 

80 

The table that follows shows commitments and contingencies by type. For contingencies, the maximum 

risk that the Government is exposed to is shown. 
30 

Commitments and Contingencies 

of the United States Government 

for the Years Ended September 30, 1988 and 1987 

($ billions) 

Commitments 

Long-term contracts 

Tennessee Valley Au thority ......... . . ... .. .. . . .. . . . . . . . . .. . . . . . .... .... .. ... .. . .. . .. ... . . . 

Defense ... . .. . ... . .. . . .. . . .. .. .. .. . ... . . ... . .... . .. . ... . .. . .. . .. . . . . . . . .. . . .. . .. . ... • • 

General Services Administration . . ........ . ... . . .. . . . . . . ...•........ . ... . ... . ...... ...... . .. 

U.S. Postal Service .. .. ........ . . . ..... . . . . . . .. . . . ... ... . .. . ..... ..... . . . .... . . .. .. . .. .. . 

Energy .... .. . . .. . .. .. .. . ...... .. . . .. ..... .. . . .. ..... . ..... . ... .. . . . .. ... . .. .. . . . . ... . . 

Other . .... . .. .. . .. .. ... .. .. . .. . . .. .. . .. . . . . . .. . ...... .. .. . . .. . .... ... . . . .. . .. . .. . .. .. . 

Subtotal ... . ...... . 

Undelivered orders 

Housing and Urban Development . .. . . ..... ... . . . .... . . . . .. . ... . .... • ..•. .•. .. .. ....•... .. .. 

Defense . .. . .. ........... ...... . ..... . . . ......... . ...... .. ....... . . . . .. ..... . .. . . .. •... 

Funds appropriated to the President ... ... . . . . . ... .. . . . ....... .. . .. . . . .. . .. . .. .. . . .. . .. ..... . 

Transportation . . .. .. . . ... . ...... . ............. . ............ . . .. . .. . ..... . .. . . . . .. .. . . . . . 

Health and Human Services ..... . .. . ... ... ... . .. . ..... . . .. .. .. . . . .. .. ... ......... ....... . . 

Other ..... .. . . . ....... . .. ... . . .......... . ....... . .. .. . ....... . ..... .... . ... . .. . . . . ... . 

Subtotal .......... . ... . .... . ... . ..... . ... .. ... . .. .... ..... . . . . . ... .. . . . .. . .. ... , . . • • • 

Total commitments .... . ..... .. . 

Maximum risk exposure for contingencies 

Government loan and credit guarantees 

Housing .. .. .. .. ...... ... .. . . ..... ..... ... . ... . . .. .. . . . . .... .. . . . . .. ... . ........... . .. . 

Veterans benefits . ...... ... .. . . . ......... .... .. . . . ... ..... ... ..... .. . .. . .. ... . . . . ... .... . 

Education .. ... . ..... ....... . .. .... ...... ... • ... . •................. . . .. ... . .• ... .. .. .... 

Farm ownership and rural development. .... .. . . . . . .. ..... . . . .......... .. .. . .. . ... ...... . . .. . . 

Other ....... . ....... .... . .. . . ...... . . ... . . .. ..... ...... .... . . . . .. .. . . . . .......... .... . 

Subtotal .. . . .. . . . . . . . . . . ... . . ... .. . ... ... . . . . 

Insurance in force 

Federal Deposit Insurance Corporation .. ..... . . .... ... .. ...... .... . . . . .. .. . . .. . ... . . . . 

Federal Savings and Loan Insurance Corporation . .. . . . . . . .. ..... .. . . .. . . .. . .. . . . ... . . . . . ... . .. . 

Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... . .. . . ...... . 

Federal Emergency Management Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... . ....... ... . 

National Credit Union Admini stration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..... . .. . 

Nuclear Regulatory Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . .... . ........ .. . . ... . . . . ...... . 

Other ... .. . . . 

Subtotal . . . . . 

Unadjudicated claims 

Energy . .. . .... .. .. ... . .... . . . . . . .. . . ... . .. ... ...... .. ... ....... ......... .. . ....... . . . . 

Transportation .... .. ...•....•. ..••... . ...... .. . . . .. .... . . . ... . .. . .. .. . . ...... ... . . . . . . . . 

Other . . .. . . .. . .. .. . . . . . . .. . . . . .. .. ........ . .. .... ••••••• • •• •••• •• · · • ·· ···· · · · · · · · · · · · 

Subtotal ... . 

Other conting encies 

Veterans benefits ... ... ........ ... . . .. ... . .. .. . . .. .. .. .. . . . . . . . . . . . . .. . . .. . . . . . 

Multilateral development banks . . . . . . . . . . . . . . . . . . . . ... . ... . . . . . ....... . . . . 

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........ . ...... . . ... . ... . 

Subtotal . . .. . . 

Total . . .. . .. . .... . ... • . ....... . .... . ... .. .... . ..... ..... . . 

Amounts outstanding 

1988 1987 

5.7 6.7 

5.5 1.8 

3.0 2.9 

1.9 1.4 

.4 .3 

.8 .4 

17.3 13.5 

195.1 202.3 

167.6 173.6 

36.2 37.2 

33.4 34.5 

31.8 24.2 

6 1.0 57.1 

525.1 528.9 

542.4 542.4 

673.9 650.0 

65.2 65.9 

53.1 48.5 

10.1 7.2 

86.3 73.4 

888.6 845.0 

1,682.8 1,605.7 

972.5 898.0 

201 .8 162.2 

168.8 158.7 

157.3 148.7 

72.5 87.5 

36.5 59.8 

3,292.2 3,120.6 

304.2 10.1 

39.6 40.0 

21 .7 25.4 

365.5 75.5 

10.1 14.1 

4.3 4.4 

9.3 10.4 

23.7 28.9 

4,570.0 4,070.0 
31 

ADDITIONS TO NON-FEDERAL ECONOMIC RESOURCES 

The following chart indicates the ways in which the Government uses its resources to add to the physical 

and human resources of the Nation without acquiring physical assets. 

Educatio 

Education-Income Suppor 

6% 

FISCAL 1988 ADDITIONS 

Total : $69.0 billion 

Heall 

12% 

dditions to State, Local, and Pri vate Assets 

II Other 

10% 

The table which follows shows the amounts of these expenditures. Some of these investment-type expenditures, while not adding to the Federal assets, add to the assets of State and local governments or private 

institutions, and all enhance the future productivity of the Nation. 

Additions to State, local, and private assets include construction grants for highways, hospitals, and airports, subsidies to the merchant fleet, and conservation projects, which increase the value of private farmland 

and water resources. Other developmental expenditures reflect current Federal expenditures and grants which 

will benefit the Nation in future years by increasing productivity or well-being. These include research and development costs and education and training. 
32 

Additions to Non-Federal 

Economic Resources 

for the Years Ended September 30, 1988 and 1987 

($ billions) 

Additions to State, local, and private assets 

Community and regional development. .. .. . ... ... . ... ... . . . ... . . . .... .. . ......... . . .. ... . .... .. . .. . 

Environment . ... ...... . ... . ...... ..... ... ... .... ....... . . . .... . .... . ... . . . . . . .. .. . . . ..... . ... . 

Transportation 

Highways and mass transit ...... . .. . . ........ . . . . . .. ... . . .. ... .... .. .... .... .. . . . . ....... .... . 

Rail and air . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. .. . .. . 

Other .......... . .. .. . . .. . . . . .. ... . .. . . . . .. . . .. . . .. . . .. . . . . ... .. . . . .. . ...... . ..... . ..... .... . . 

Total additions . . .. .... . ...... . ... . . ... .... .. .. . . . . . ... . . .... . . .. . .. . . . . .. . . .. . . .. . .. .... ... . 

Other developmental expenditures 

Agriculture . .. . .. .. .... . . 

Conservation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...... ... . . . . . ..... . ... . 

Economic development . . . ... . . . ..... .. . . . . .. . .. . .. ... . .. . .. .. ... . . .. .. . .. . . .. .. . . .. . .. ... . . .. . . 

Education .. .. . ...... ... .. ..... .. .... .... ... . .... ... . . ... . . ... .. . .. . . . ...... . .. .. .. .. .. . . . . .. . 

Education-income support . . . . ... ..... ..... .. .... . ....... . ...... .. ... . .... . . . ... .. .. .. . . . .. . . .. . . 

Environment . . ........ . . .. ...... ... ... . . ... . ...... . . ............ .. . .. .... . .... . . . .. . . .. . . . .. . . 

Health .... .. ....... . .. . .. ... .. . . . . ..... . . ... ... . ..... . ........ . ... .. . ... ... ... .. .. . .. . 

Science and engineering ... .. ...... . .... .. . ..... ... . ....... .. ..... . . • .. .... . .... . . .... . ..... . . . . 

Training .......... . ...... . ... . .. .. . .. . . .. ....... .. ... .. .. .. .. . . . . . .. . .. . 

Transportation ... . .. . .. . .. ... ...... ... . . ... . ... ..... . . .. ....... . ...... . .. . . ... ....... .. . 

Other . ...... . . . . .. . ... . .. . . . . . ... .. ... . .. . . ... . . .. . . .. ... . .. . ... . . .. . .. ........ . ... . .. . .... . . 

Total developmental expenditures . .. . . ... . .. . .. . .. ... . . .. .. ... . . . . .. . . .. . . . ... ... . . .. .... .. . .. . 

Total investment outlays ... . . ... . . .. .... .... ... ... ..... . . .... . . . ... . . . . .... .. . . .. . . .. . . . . . . . . 

Source : Budget of the United States Government, Fiscal Year 1990. 

1988 1987 

4.0 4.0 

2.8 3.2 

16.1 15.0 

.8 .9 

.3 .3 

24.0 23.4 

1.0 .9 

2.9 3.0 

.4 .3 

16.2 15.2 

4.1 4.0 

.3 .3 

8.1 7.0 

7.1 6.4 

3.8 3.7 

.3 .3 

.8 .7 

45.0 41.8 

69.0 65.2 
EFFECT OF INDIVIDUAL AND CORPORATE TAX BENEFITS 

ON FEDERAL REVENUES 

The following table is designed to show the revenue losses attributable to tax law provisions that allow 

special exclusions, exemptions, or deductions from gross income or provide special credits, tax rates, or deferrals. The schedule shows the approximate cost of tax benefits. 

33 

Revenue loss estimates do not take into account the additional resources, if any, that would be required 

to provide the same after-tax incentives if the expenditure program were administered as a direct outlay rather 

than through the tax system. These revenue loss estimates are not equivalent to estimates of the increase in 

Federal receipts that would result from the repeal of tax expenditure provisions. 

Some minor distortions may have occurred since data presented have been condensed for purposes of 

this report. For further information, refer to "Special Analysis G: Tax Expenditures" in Special Analyses, Budget of 

the United States Government for fiscal years 1989 and 1990. 

Effect of Individual and Corporate Tax Benefits on Federal Revenues for Tax Years 1988 and 1987 

($ billions) 

Income exclusions 

Capital gains at death . . . . . . ... . .. . ... . . ... .... . .. ...•....... . . . .. ... . ... ...... . . .... . . 

Disability and retirement benefits (private) ..... . . . . . . .. . .. . . . . . .. . ...........•..... . .. .. .... . .. . . . 

Social security benefits . . ..... . ...... . . . .... . .... .. ... . .. .. . . . . . . ....•........ .. .... .. . .. . 

Education allowances (scholarships and GI benefits) ........... . ..... . . . .. .. . . .......• • . ... . . ... . . . 

Foreign earnings and investm ent incentives (income earned abroad) ..... . ....... . .. . . . . . ... .. • ..... ... 

Interest and dividends (State and local bonds and debt, and life insurance) .. . ... . .. . . . . ... . ........ . ... . 

Medical care and insurance (employer premiums paid) . . ...... .. .. . . . .. . . .. .. . . .. ......... ... .. . ... . 

Payroll benefits and allowances (group life, accident, and unemployment) .... .. .. ... .. . ... . .. .... . . . . •.. 

Other (age 55 or over credit on home sales) .......... . .... . ... . . . . . ..... • ... . ..... ..... .......... 

Income deferrals 

Interest on U.S. saving bonds .... . . . . . ..... . . .. . .. . .. . . ... . .. . . . . . . .. . . .. . . . . . . .. . . . ... .. .. .. . . 

Real estate (home sales) .. . . . . . . .. ..... .. . .. . . . .... . .... .. . . . . ........ .. . . . ... . .. ... . . . . .. . . . 

Foreign earnings (foreign sales corporations) ........... . ..... . ......... . ..... . . ... . .. . .. . .. .. . . . . 

Other deferrals 

Taxes (shipping companies) ...... . . ... . . .. . .. . . . ... . ..... . . . . .. .. ... . .... . . . . . . . ... . .... . . ... . 

Deductions and credits 

Agriculture related (capital outlays and gains on certain income) .... . ...... . ... . .. . .. .. . .. • . .. . ...•. .. 

Contributions (charitable and political) . . . ....... . . ... . .. .. . ... . ... . .... . . .. . . . .. ........ ........ . 

Earned income ..... . ............ ... . .. . . .. .. .. ... ...... . . . .. ... .. . . . . . .. . . . . . ........ .... . . 

Employee stock ownership plans (funded through investment and tax credits) ... . . . ..... .. . ... ... . ... .. . . 

Excess bad debt reserves (financial institutions) ....... . .............. . .... . .. . .. ... . ... ... . .. . ... . 

Exemptions (credit unions) ...... . .... . ........ .. . . . .. ..... . .. . .. . . .. . . . .. . .. . . . ... . ... .. . .... . 

Foreign earnings (corporations doing business in U.S. possessions) .... . .. . . ... . . .. . .. .... ... .. . . ... . . 

Interest (mortgage and consumer) . . .......... . ............. . . . ..... . . .. ... . ... . . . .. .. . . . . 

Investments (commercial capital gains, credits , other investment incentives, construction period 

interest, and expensing developmental costs) . . . ... ........... .. .... . . . ... . .. . . . . . . ... .. . .. . ... . . 

Medical ... . . . . . .. ...... . . .... . .... ... . . . .. ...... . . . ..... .. .. ... .... . ... . . .. . . . . ... . 

Mining and timber (capital gains treatment of royalties and certain income) ..... ... . . .. ... .. . . ... ..... . . . 

Old-age, disability, and other personal exemptions . . . . . . . . . . . . . ............. .. ... . ... . . . . 

Other (deductions of motor carrier rights , certain adoption expenses, and energy credit for intercity buses) .. . . . 

Property damages and losses (casualty losse s) .. . . ............................. ... . ... ....... .. . . 

State and local property tax and other taxes . . . .. . . . . . . . ... . . . ... . . .. . . .............. .. . . 

Work incentives (employment credits under work programs) and dependent care ... . ....... . ... . . .. ..... . 

Accelerated depreciation (rental housing, buildings other than rental housing, and machinery and equipment) .. 

• Less than $50 million. 

Estimated amount 

of revenue loss 

1988 1987 

11 .5 5.7 

60.1 67.9 

17.4 18.5 

1.3 .9 

4.3 4.0 

26.6 29.3 

30.1 24.6 

4.9 5.1 

6.2 5.9 

.9 .9 

4.0 2.6 

.1 .2 

.2 .1 

.5 .6 

13.5 15.6 

1.0 5.9 

.4 .7 

.1 .4 

.2 .2 

1.8 1.9 

40.3 46.6 

14.1 80.7 

2.0 3.2 

1.1 1.3 

2.2 3.6 

1.5 

.3 .3 

27.4 32.8 

3.7 3.6 

24.4 13.8 
34 

OPEN-ENDED PROGRAMS AND FIXED COSTS 

The Government commits itself to provide services by passing laws that make spending mandatory. 

Since a significant amount of future spending is fixed by law, it is very probable that the Government will pay for 

these programs in future years. Listed below are the programs for fiscal years 1988 and 1987 that can be terminated only if the laws are changed . For further information, refer to the summary table entitled "Controllability of 

Outlays, 1988-90" in the Budget of the United States Government, Fiscal Year 1990. 

Payments for individuals 

Open-ended Programs and Fixed Costs, Fiscal Years 1988 and 1987 

($ billions) 

Social security and railroad retirement. ...... . . . . . ..... .. . . .. . . .. .. .. . ... .. . .. . . .. . .... . . .. .. .. . 

Federal employees' retirement insurance .. . . .. . . . . . . .. . . ... . .. . .. . ..... . .... . . . .. . . ... . . . . .. . . . 

Unemployment assistance ....... .. . . . .. . . ...... . . .. . ..... . . .. . .... . ... . . .. . . ... . .......... . . 

Assistance to students . . . . . . . . . . . . . . . . . . . ...... . .. . ... . .. .. . .. . . ... . . . . .. . . .. . .. . . . 

Food and nutrition assistance ..... . 

All other . . . .... . .. ... ........ . ..... . 

Medical care .... . .. . . . ........... . 

Public-assistance-related programs .......... . ..... • ...•......... . .... . . .. .• . . ... . .. . . . . ....... 

Net interest ..............•...... . .. . . ....... .. . .... . ..... .. . . . . . . . . .. . .. .. . . ...... . •.. • . .. . . 

General revenue sharing .. . . . . ... . . .. . ........................ . . . .. . . . ..... .. . ... . .. . .. ... .. . . 

Farm price supports .......... . . . .. . . . . .... . . . . ..... .. .. ... . . . . . .... .. . . .. . ... .. .. .. . ........ . 

Other open-ended programs and fixed costs ... . .. . . . . .. . . . ...... . . . . . .. . .. . . . . . .... ... . . . . .. . .... . 

Total .. . ... .. . ... .. . .. . . . .. . . . . ... . . .. . . . . . . . .. . . .. . . . ... . ... .... .. . . . . .. .. . .. . . . . . . . 

• $50 million or less. 

1988 1987 

220.3 208.6 

59.3 55.2 

13.8 15.7 

3.9 3.7 

4.3 4.1 

2.9 2.9 

114.7 105.9 

28.8 25.7 

448.0 421 .8 

151 .7 138.6 

.1 

12.2 22.4 

8.7 1.3 

620.6 584.2 
35 

FEDERAL OBLIGATIONS 

"Obligations" are the basis on which the use of funds is controlled in the Federal Government. They are 

recorded at the point at which the Government makes a firm commitment to acquire goods or services and are 

the first of the four key events--order, delivery, payment, and consumption--which characterize the acquisition 

and use of resources. In general, they consist of orders placed, contracts awarded, services received, and similar 

transactions requiring the disbursement of money. All intragovernmental items have been eliminated. 

The obligational stage of Government transactions is a strategic point in gauging the impact of the 

Government's operations on the national economy, since it frequently represents for business firms the Government's commitment which stimulates business investment, including inventory purchases and employment of 

labor. Disbursements may not occur for months after the Government places its order, but the order itself usually 

causes immediate pressure on the private economy. 

For more detail refer to the Treasury Bulletin, March 1989. 

Gross Obligations of the Federal Government by Object Class, as of Sept. 30, 1988 and 1987 

($ millions) 

Personal services and benefits 

Personnel compensation . .... . 

Personnel benefits . . ... . 

Benefits for former personnel ..... . 

Contractual services and supplies 

Travel and transportation of persons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. .. . . . 

Transportation of things . . . . . . .. .. . .. . . . .. . . . .. . . . .. ...... . .... . ... . . . . . . .. . . ........... . . 

Rent, communications, and utilities ...... . . . . ... . . .... . . . .. .. . . ........ . ... . .. . . . . . . . ... . . .... . 

Printing and reproduction ...... . . .. . . .. . . . . . .. . . .... . . .. ... . . . . . .. ..... . . .. . . ... . . . . . . . . . . . . . 

Other services . . . . . . . . . . . . . . . . . . . . . . . . . . . ........ . ... . . . . . . ...... . ........ . . .. .. .. ... . 

Supplies and materials .. . .. .. .. . .. . ... . ... . ... . .... .. .. ... . . . . .. . ...... . .......... ... . .... . . 

Acquisition of capital assets 

Equipment .... . ......... . 

Lands and structures .. . . 

Investments and loans .. 

Grants and fixed charges 

Grants, subsidies, and contributions . 

Insurance claims and indemnities . . . . . ..... . . . . . ... . . . ..... . . . ........... . .. • ... . .. . . . . ..... .. 

Interest and dividends ........ .. .. . ... . . . . . . . .... . .... .. . . . . .. .. . . . . .. .. ...... . ....... .... . . 

Refunds . . . . . . . . . . . . . . . . . . . . . . .. . . . ..........•.•. . • ... . . . . . . • .... . . . . . ... . .... .. . . .. . . 

Other 

Unvouchered .. . . . . ... . . . 

Undistributed U.S. obligations . . . . . . . ... . . . . . . . . .. ... . .. .. . .... . . .. . . .. . . . .. .. . ... . .. . . . ... . . . 

1988 1987 

139,751 

8,499 

1,395 

5,112 

7,124 

11 ,273 

330 

138,121 

63,148 

74,846 

17,319 

32,032 

192,008 

394,660 

188,000 

871 

108 

9,734 

135,815 

8,910 

775 

4,863 

7,039 

10,445 

1,050 

126,651 

67,739 

77,365 

17,406 

34,374 

171 ,329 

375,543 

171,465 

931 

17 

4,344 

Gross obligation s incurred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . • • . . . . . . . . . . 1,284,331 1,216,061 
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Sold on a subscription basis only ( exceptions noted) by the Superintendent of Documents, 

U.S. Government Printing Office, Washington, D.C. 20402 (phone orders: (202) 783 -3238): 

• Daily Treasury Statement. Provides summary data on the Treasury's cash and debt 

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• Monthly Treasury Statement of Receipts and Outlays of the United States Government. Provides Federal budget results, including receipts and outlays of funds, 

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and U.S. Currency and Coin Outstanding and in Circulation. Compiled by Financial 

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• United States Government Annual Report and Appendix. Annual Report presents 

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Service. Annual Report single copy price: $2.50; Appendix free from Financial 

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OI'FICE OF THE COMMISSIONER 

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PENALTY FOR PRIVATE USI<,, $'mo 

HIGHLIGHTS 

• Gold holdings determined by market value 

• Loans receivable decreased by nearly $26 billion 

• Total contingencies totaled $4.6 trillion 

• Liabilities amounted to $3.6 trillion 

IGEf' IIIDCf'>J 3J>I11 ii 

FIRS IC L \SS MAIL 

POSTAGE & FEES PAID 

Dt'partment of the Trea'lury 

Permit \Jo. G-4